The road to purchasing your first home is an exciting adventure filled with twists and turns. For many young home buyers, signing on the dotted line is the first step into adulthood. Though first-time home buyers may be eager to get started, it’s also normal to have lots of questions about the process.
To quell any lingering anxieties, we’ve compiled a list to answer some of the most common questions related to home insurance.
1. What is homeowners insurance?
Home insurance is a form of property insurance that protects the owner or buyer in the case of damage or loss. This can apply to interior and exterior property, furnishings, and assets caused by theft, natural disaster, or other occurrences. With home insurance, you can repair a home or replace personal belongings. This type of insurance applies not only to homeowners but also to renters.
Beyond the protection of property, home insurance also provides liability coverage if someone is injured on your property.
2. What types of homeowners insurance are there?
Home insurance types are generally broken down into eight categories: HO-1 through HO-8. Each policy comes with its own range of coverage as well as exclusions.
- HO-1: Most basic type of homeowners insurance (uncommon today due to its limitations)
- HO-2: General policy that protects against a specific list of perils
- HO-3: Most common type of coverage that includes coverage for both peril and open peril
- HO-4: Specific to renters
- HO-5: Second-most common and comprehensive policy for homeowners
- HO-6: Best suited for condo owners
- HO-7: For mobile or manufactured homes
- HO-8: Special homeowners insurance for those not covered under other policies
3. What should I look for in a homeowners insurance policy?
It is important to read the fine print when choosing an insurance policy to make sure critical perils are not excluded, especially in the case of natural disasters (fire, lightning, windstorms/hail, ice, snow, sleet). You’ll also want to compare deductibles and take notice of liability limits. The most common types of deductibles include flat deductibles (fixed dollar amounts), percent deductibles, and split deductibles.
4. How much does homeowners insurance cost?
Home insurance costs vary and are largely dependent on property value and building costs. This includes construction costs, quality of home materials (e.g., roof and exterior and interior wall construction), number of bedrooms and bathrooms, total square footage, and additional features (e.g., garage, fireplace). Homeowners must consider the replacement cost coverage versus the actual cash value of each item.
The cost of home insurance varies widely from state to state, but the average annual premium across the U.S. is $1,015.
5. Is homeowners insurance required by law?
Home insurance requirements also vary by state. However, your mortgage lender will likely require homeowners insurance in order to provide you with a home loan.
Regardless of whether or not it is mandatory, purchasing insurance is undoubtedly a best practice. No one enters the early stages of home buying expecting to incur property damage or loss, and extreme property damage caused by a natural disaster may seem like a highly unlikely occurrence. However, the cost of enduring these disasters uninsured could be devastating. Homeowners insurance protects you from even the most unexpected damage or loss.
6. What are the most important benefits of having homeowners insurance?
Home insurance first and foremost provides peace of mind. You’ll never have to wonder what the outcome will be for you and your family should you experience a house fire, natural disaster, or major theft. Home insurance provides protection in the form of legal support should someone get injured while on your property. In the case of property damage that renders your home uninhabitable (e.g., smoke damage after a house fire), home insurance provides immediate relief in the form of temporary housing at a time when you need it the most.
Each circumstance is unique. File a claim and speak with your insurance agent. Review your policy, limits of eligibility, and deductible, and consider the replacement cost coverage versus actual cash value.
7. In the case of a natural disaster, will I be fully covered by my homeowners insurance?
With homeowners insurance, you can avoid paying 100 percent out of pocket. The amount of coverage varies greatly based on policy provisions. The most suitable plan for you and your household will depend largely on risks associated with your geographic location. For example, if you live in an area prone to cold weather or windstorms, make sure these perils are covered under your policy.
Note that floods, earthquakes, maintenance damage, and sewer backup are not covered under homeowners insurance.
8. Where can I learn more?
Choosing a policy that’s right for you may seem tedious at first, but it is well worth the effort to protect your family’s home and the memories kept safe inside.
Speak with First State Insurance Agency, Inc. today to learn more about:
- Property insurance
- Homeowners liability
- Renters insurance
- Condo insurance
- Mobile home insurance
- Scheduled property insurance
- Landlords insurance
- In-home business insurance